Price of an Assumption

It is always exciting to unwrap something from an idea to a real life product. For me though this is a very tricky issue because one always needs to play several contradictory roles in this process. On the one hand, one needs to be “infected” with this idea and the infection has to be really strong to easily infect everybody in the team with the idea. On the other hand, one has to estimate critically enough whether this idea is viable, feasible, and brings some value. Playing all these roles simultaneously is always difficult.

So what can we do to start playing effectively both roles in the development of the potential product? As for me, we must start to think that, as a rule, an idea is particularly based on our personal judgements, life experience, opinions, etc. If one can start thinking like this, he or she can ask oneself a question:

What my idea is based on?

Thinking like this, one can create a list of assumptions. Sometimes we are able to state them clearly, but sometimes we cannot. For example, as a rule, assumptions underlying a startup can be split into two major groups. One group is based on potential users, and the other is based on assumptions about their needs. What is the difference between an assumption and “obviously” not an assumption, and how can we find a hidden one? I think that at the initial stage the best way to get a real image of an idea is to conduct various workshops to find out all the assumptions underlying the idea. It is important to be sure that the majority of participants of a workshop is not hardly “infected” with the idea and able to think critically about it.

I think that creation of a list of assumption is a huge step to success! When it is done, we can start thinking how strong or weak assumptions are, and how to test them. To do this, we can retrieve more information about each assumption, like its boundaries, probability, impact. From this point of view, a hypothesis is an evolution of an assumption based on detailed information about it. Understanding characteristics of a hypothesis helps sort them depending on our strategic goal.

I believe that future activity with a hypothesis can follow two extreme approaches. The first one is to verify the hypothesis. The verification process may not include product development, one can use interviewing, prototyping, and many other techniques. This approach can provide a lot of useful information to get new ideas, assumptions, and hypotheses. Eric Ries provides many interesting examples about hypothesis verification in his book “The Lean Startup”. The other approach is to do nothing and wait for a Minimum Viable Product (MVP) to validate them by market. In this case, we need to understand that the price of a wrong assumption can be as high as the price of an MVP.

Why is it important to think about assumptions as soon as possible? The cost of a mistake at early phases can be up to 1,000 times lower than at final phases (NASA Johnson Space Center, Error Cost Escalation Through the Project Life Cycle. 2004). Therefore, timely evaluation and critical consideration of an idea can help avoid mistakes and save a lot of money.

To summarize: let’s think how our world would look like, if IBM management team strictly followed the words of their presidents Thomas Watson who said in 1943: “I think there is a world for maybe five computers”.

Useful links:

Also at https://youtu.be/yBA4y-78e2A, you can find a real life example of how an author validated his hypothesis regarding the market of scooters in USA as well as the description of his fails and lessons learned.

Andriy

Partyko

Andriy works as a Business Analyst in Sigma Software since February 2017. He has an experience in solving real life business cases for more than 10 years, especially in fields of logistics, automotive and retail. Andriy was engaged as a Business Analyst in several startups during the last year. The combination of theoretical knowledge and real life experience helps him to solve difficult cases at the level of both enterprise solutions and startups.